UPDATE 3-Schindler H1 net flat, drop in orders to hit Q4

* Schindler H1 net profit 320 mln Sfr, vs 287 mln forecast

* H1 order drop in new installations to hit Q4 results

* More capacity cuts necessary if markets don't stabilise

* Stock falls over 2 pct vs 0.8 pct rise in DJ Stoxx ind goods index (Adds analyst comment, updates shares)

By Katie Reid

ZURICH, Aug 18 (Reuters) - Swiss lift and escalator maker Schindler SCHP.S (SCHN.S) posted flat first-half net profit on Tuesday and said a first-half drop in orders would start to hit results from the fourth quarter.

Net profit edged up 2 percent to 320 million Swiss francs ($297 million), beating the 287 million forecast in a Reuters poll, but shares fell as investors worried about the impact of the downturn.

"The elevators and escalators (E&E) business takes a long time to react to economic developments. The decline in orders received in the new installation business in the first half of 2009 will begin to affect results in the fourth quarter of 2009 and will continue to have an impact in 2010," the group said.

By 1228 GMT, the group's stock was trading 2.2 percent lower at 68.00 Swiss francs, underperforming a 0.8 percent rise in the DJ Stoxx industrial goods and service index .SXNP.

Deutsche Bank analysts said there were hopeful signs in the release, however.

"While the difficult order intake and sales development was expected, in our view, we believe that Schindler's E&E margins performance can be interpreted as positive," they said.

The E&E operating margin rose to 12 percent from 10 percent in the year-ago period thanks to cost controls and lower raw material prices.

Schindler, which competes with United Technologies Corp's (UTX.N) Otis and Finland's Kone (KNEBV.HE), said more capacity cuts could come in the second half of the year if markets do not stabilise. The group has already adjusted capacity in the U.S. and Spain as well as in production units.

The group forecast 2009 net profit at the same level as last year, excluding "recession-related restructuring costs" estimated at around 100 million francs. Schindler reported a 2008 net profit of 634 million francs.

Kone said last month it expected its full-year results to improve as it posted strong second-quarter earnings, helped by tight cost control and a strong order book powered by demand from China. [ID:nLL90963]

First-half orders at Schindler dropped 17 percent to 6.1 billion francs, while orders in its elevators and escalators unit fell 15 percent to 4.2 billion francs.

"More importantly, orders of new installations were down 29 percent and the pace of the order decline accelerated in the second quarter," one Zurich-based analyst said.

"This is much worse than Kone and is due to the fact that Schindler has higher market share in the United States, while Kone is doing better than Schindler in Asia," the analyst said. (Reporting by Katie Reid, editing by Will Waterman and Rupert Winchester) ($1 = 1.077 Swiss francs)